To The Moon

As we have seen treasury yield went up after new home sales and building permits data for September came in positive.

Investors have been considering the state of the economy. Israel-Hamas war have been closely watched to see what is the impact on the global economy, particular the energy sector.

Something we might want to take note is there is no significant run on Treasury since the war began — a common phenomenon during times of geopolitical crisis.

But we do see the 10-year Treasury moving up steadily over the last 2 weeks and it has also hit more than 5% (its multiyear highs) within this week. On top of this investors are also considering what would be Fed’s decision on the interest rates when they meet for FOMC from 31 Oct to 01 Nov.

There have been some suggestions from several Fed officials that economy would slow down because tighter financial conditions could be created by higher Treasury yields.

This would mean Fed does not need to go for rate hike. This actually give investors hope that rates will remain unchanged next week. But is it going to be this way?

The yield on the 10-year Treasury was up by 11 basis points at 4.954%. The yield on the 2-year Treasury was hovering near the flatline at 5.1%. Yields and prices move in opposite directions. One basis point equals 0.01%.

In this article I would like to look at how treasury yield increase have been seen by the tech stocks. I will be touching on those tech stocks which has or is going for their earnings release.

Will the yield help them, and traditionally these stocks have been used as defensive against potential rate hike. Will they lose the appeal?

$Nasdaq100 Bear 3X ETF(SQQQ)$

As we have seen Nasdaq falling by more than 2% last night, it should give us some signals that tech intensive index is falling and things might not turn around so soon.

But have you wondered why SQQQ behave in this way when yield is reported to be trending upwards?

I have plotted the chart of SQQQ vs the 10 years Treasury yield, it has been almost certain that SQQQ follows the trend of how yield move (in this context, will be the 10 year treasury).

So this might give me a clue on how I can plan my trade on NASDAQ related ETF. Next, I will share how another ETF might have moved in relation to yield rise. Fidelity NASDAQ Composite (ONEQ)

$Fidelity NASDAQ Composite Index ETF(ONEQ)$

This ETF has most of the big tech stocks in it, and it has not doing well, being in a roller coaster ride over the past 5 trading days.

I will be more interested to see how this ETF trade relate to the move in yield in recent weeks.

This ETF does not give us any surprise, it is actually like what most analysts say of yields and prices move in opposite direction. But will we expect any surprise from strong earnings given by members of the composition?

For example, Microsoft have rise more than 3% last night, will it do the same tonight?

$Microsoft(MSFT)$

As mentioned in previous section, we can see that yield and prices move in opposite direction, from the chart below of Microsoft and yield, it seems to be true until 24 Oct, when Microsoft have almost similar move as yield.

But this could be due to a stronger earnings posted by Microsoft, today will be second day after earnings, will Microsoft continue its run?

Microsoft Still Trading Above 50-day MA period

Microsoft is still trading above the 50-day MA period and it should continue to do well, and I do not see much impact coming from higher yield on Microsoft.

Microsoft No Signs Of Any Potential Reversal From Parabolic SAR

There is no clear signal of another reversal, Microsoft have a bullish reversal in early October, and near its earning date, there is no reversal.

This is good news for Microsoft shareholders and they should be able to perform though I still see some small correction along the way.

$Alphabet(GOOGL)$

If we looked at Alphabet we will discover that it actually have defied the trend, it does move higher when yield is going down.

The recent negative earnings really cause a plunge in Alphabet share price, so will we be Alphabet coming back from its downside trend?

I believe yield might not go much higher as that would mean economy overheating as well. There should be a balance to strike.

I will be more interested to see how Amazon would turn up.

$Amazon.com(AMZN)$

If you have read my previous article on Amazon earnings, Amazon (AMZN) Earnings. Option Implied Move Hints At Price Volatility Post Earnings.

I used Option Implied Move to analyze and found that Amazon might experience price volatility post earnings, it will be releasing its result after market today (26 Oct).

But it has fallen by more than 5% in yesterday (25 Oct) trading. So what does yield rise have in relation with Amazon?

From the chart below, we can see that it is exactly in opposite direction for Amazon, so we could be seeing Amazon going down further if yield continue to increase tonight.

Maybe even with strong and positive earnings, we might not see Amazon gaining much.

Summary

From what I have gathered, it looks like yield and prices move in opposite direction does not really apply to all stocks, especially for tech stocks.

I am only use 3 tech stocks which are having their earning report recently, and we can see that there is a difference on how these stocks would move when the yield increase.

Anyway, it is still advisable to be cautious and look out for any signal market might present. Yield might be good to keep rate hike unchanged, but if it keep increasing, we might have economy heating up.

That will be not so good. I will be monitoring the big tech stocks and see how ETF would perform as well. For now, I have a position on SQQQ, shall see if it is time to increase more.

Appreciate if you could share your thoughts in the comment section whether you think tech stocks will suffer more selloffs followed by more yield increase. We might see yield crossing more than 5% again.

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.